Stock prices closed sharply lower today in the heaviest trading in nearly three months as investors retreated from equities that analysts consider overvalued in light of disappointing corporate earnings.

The Dow Jones industrial average, which fell 27.98 points Monday, closed down 24.75 points today to 1,768.70. In the past seven trading sessions, the Dow has shed 132.17 points.

Declines led advances by some 3 to 1 on the New York Stock Exchange tape.

Broad market indicators also fell. The New York Stock Exchange composite index dropped 2.36 points to 134.91, and the price of an average share lost 67 cents. Standard & Poor's 500-stock index fell 4.45 points to 233.66.

On the Big Board, 183.98 million shares changed hands compared with 123.17 million traded Monday.

Composite volume of stocks traded on all U.S. exchanges and over the counter was 214.83 million shares compared with 147.68 million in the previous session.

Despite the depth of recent dives in the Dow Jones industrial average and other market barometers, most analysts believe stock prices are bound to head higher and continue the most powerful bull market since World War II.

The argument is that stock prices eventually will reach levels low enough to attract buyers back to the market.

But investors apparently were uneasy today about the outlook for many corporations, especially after the disappointing earnings report from International Business Machines on Monday. With the economy now in worse shape than generally had been foreseen, companies probably will not post significant profit improvements in the near future, analysts say.

"There is a general malaise" in the market, said Hildegard Zagorski of Prudential-Bache Securities. "Part of the overall weakness is in IBM."

Retail sales rose an estimated 0.2 percent in June, following upwardly revised gains of 0.9 percent in April and 0.7 percent in May, the Commerce Department said.

The nation's industrial production decreased an estimated 0.5 percent in June after declining a revised 0.4 percent in May, the Federal Reserve Board said.